Purchasing a business.

[Gino]

Hahahaaaa......... I don't get it, 1203 just joined and is ripping into the toadster and he doesn't care or notice. He's out with his friends with his libations, forgetting about life for a while. Good for him. As for this thread, I haven't seen this much effort put into a newbie..... lile, ever.

Something's rotten in Denmark

 

[Stacy1203]

Hahahaaaa......... I don't get it, 1203 just joined and is ripping into the toadster and he doesn't care or notice. He's out with his friends with his libations, forgetting about life for a while. Good for him. As for this thread, I haven't seen this much effort put into a newbie..... lile, ever.

Something's rotten in Denmark

Hahahahahah *adjusts newbie crown hahaha I kidd! Toadster will probably be back to hurl one more insult at me. But hey it’s all fun and games!

 

[Texas_Signmaker]

I traveled to Florida today and this thread kept me entertained...usually not much goes on here during the weekends. Thanks for making the trip a little less boring.

And thanks for being on the good side Stacy... all the business and blessings your way.

 

[Stacy1203]

I traveled to Florida today and this thread kept me entertained...usually not much goes on here during the weekends. Thanks for making the trip a little less boring.

And thanks for being on the good side Stacy... all the business and blessings your way.

Hahaha so glad you found some entertainment for your trip! Talk about perfect timing! Same wishes of success and blessings to you my Texan Sign-making Friend!

 

[MelloImagingTechnologies]

I have been setting up startup graphics sign companies for 20 years.
In the current time the best investment you can make is to have an excellent graphics designer employed as well as spending money on internet marketing.
I have trained many customers how to produce wide format graphics also.
You can text me any questions
Bruce
631-520-3074

 

[WildWestDesigns]

In the current time the best investment you can make is to have an excellent graphics designer employed as well as spending money on internet marketing.

For an embroidery business (which is what they are buying) this isn't quite the case. Being able to design is a huge plus, but knowing production is more important then design. There are people that make good money in this trade that all they do is replicate. That's the important thing, knowing production, what will or won't translate, why and what can they do to make it look like it translated, but it's more about stitch type "trickery".

With "auto conversion" being all the rage in software (some call it auto digitizing, but it's really not and no matter how expensive the software is, it's still implemented worse then powertrace/live trace), not knowing production is what really kills. Even if the design is good and the output is good visual quality, if it runs for 50 mins versus 25 or 30 minutes, doesn't matter if running a single head or multi-heads or combination thereof, it's killing your bottom line.

You can be a kickass designer, but what you design doesn't work, because the production value isn't worth anything. Not many can do both and that's why we see a lot of people ripping off already done design and digitizing those, because all they can do is replicate (nothing wrong with only being able to replicate, it's what you replicate that's the concern with me).


What ikarasu said, even though specifically mention sign shops versus embroidery shops (which is what is being bought), actually still applies. Competition is fierce and there is very little divergence of competition outside of price for the most part. Knowing how to design my own stuff and knowing production (shoot most of my business is doing the pattern work (either from concept to stitch file or just the stitch file) for other shops) is what sets me apart from other shops. With more and more people using/recommending auto conversion and the rise of even more people getting into this trade, it's getting harder and harder to see a difference. Embroidery is going in very much the same direction that signs is going.

Doesn't mean that one still can't do well and thrive, but have to be a little more honest with the hurdles that are out there. Although it doesn't hurt if you also check some political check boxes (is it in your name or shared with your hubby or what)? Might be able to get subsidies that way to help out.

I love what I do, I teach other people to do what I do, but make no mistake it has it's hurdles.

 

[Stacy1203]

I have been setting up startup graphics sign companies for 20 years.
In the current time the best investment you can make is to have an excellent graphics designer employed as well as spending money on internet marketing.
I have trained many customers how to produce wide format graphics also.
You can text me any questions
Bruce
631-520-3074

Most certainly will connect with you Bruce! Internet marketing is absolutely an area we are determined to take a healthy swing at. Thanks Pal

 

[Stacy1203]

For an embroidery business (which is what they are buying) this isn't quite the case. Being able to design is a huge plus, but knowing production is more important then design. There are people that make good money in this trade that all they do is replicate. That's the important thing, knowing production, what will or won't translate, why and what can they do to make it look like it translated, but it's more about stitch type "trickery".

With "auto conversion" being all the rage in software (some call it auto digitizing, but it's really not and no matter how expensive the software is, it's still implemented worse then powertrace/live trace), not knowing production is what really kills. Even if the design is good and the output is good visual quality, if it runs for 50 mins versus 25 or 30 minutes, doesn't matter if running a single head or multi-heads or combination thereof, it's killing your bottom line.

You can be a kickass designer, but what you design doesn't work, because the production value isn't worth anything. Not many can do both and that's why we see a lot of people ripping off already done design and digitizing those, because all they can do is replicate (nothing wrong with only being able to replicate, it's what you replicate that's the concern with me).


What ikarasu said, even though specifically mention sign shops versus embroidery shops (which is what is being bought), actually still applies. Competition is fierce and there is very little divergence of competition outside of price for the most part. Knowing how to design my own stuff and knowing production (shoot most of my business is doing the pattern work (either from concept to stitch file or just the stitch file) for other shops) is what sets me apart from other shops. With more and more people using/recommending auto conversion and the rise of even more people getting into this trade, it's getting harder and harder to see a difference. Embroidery is going in very much the same direction that signs is going.

Doesn't mean that one still can't do well and thrive, but have to be a little more honest with the hurdles that are out there. Although it doesn't hurt if you also check some political check boxes (is it in your name or shared with your hubby or what)? Might be able to get subsidies that way to help out.

I love what I do, I teach other people to do what I do, but make no mistake it has it's hurdles.

Agreed... if purchasing this acquisition it would no longer be just a embroidery shop but all of the above still hid weight. We currently use Wilcom E4 and the auto digitizing still isn’t crispy I find myself still having remove or add a layer here or there but it totally helpful and cuts a lot of time down. Designing isn’t a passion of mine but I’ve been lucky to connected with so many that this their life’s dream. I don’t focus on wearing all the hats it’s putting talented souls in place to make the dream work. Awesome pointers pal!

 

[WildWestDesigns]

Intimately familiar with Wilcom. Good program when it comes to the semi manual and manual tools.

Auto converting it really really lacks. Particularly with TTF and OTF conversions. There is a $700 dollar program that does better with lettering specifically.

Watch out for long stitches though. All auto conversion programs have that issue. Depending on what modules you have of Wilcom, easy fix.

 

[Stacy1203]

Intimately familiar with Wilcom. Good program when it comes to the semi manual and manual tools.

Auto converting it really really lacks. Particularly with TTF and OTF conversions. There is a $700 dollar program that does better with lettering specifically.

Watch out for long stitches though. All auto conversion programs have that issue. Depending on what modules you have of Wilcom, easy fix.

Yes I had a particular logo driving me BONKERS for about a week finally decided to remove all the auto underlays then logo stitched perfect hahaha I’m like what the hell man! It gets the job done though heheh

 

[Tattoosleeve]

We purchased the assets of a failing sign shop three years ago. They were doing $90k gross /year. He was asking $75,000. My heart hit my stomach when I saw the financials. Unfortunately the owner had bought it three years prior and poured in excess of $350,000 of his own imoney into it over the three years. Needless to say that could have been avoided if he knew anything about running a business but he was trying the only way he knew how.

We evaluated the assets as follows.

1. Edge FX & Envision : $12,000 for the pair
2. Customer Files : $10,000
3. Phone Number & Website : $2,000
4. Inventory : Pennies on the dollar - we cherry picked maybe 15% of their on hand materials and tools. The rest of it was odd ball colors or specialty materials that were never going to get used.

We explained our assessment of assets and offered $24k. He balked and walked. A month later he came back and took our offer because it was the only offer he received and every day he stayed open the more he lost.

The sale was hindered for 3 months because there were liens on his equipment we we're trying to purchase. He had to pay out the remainder of the loans on the equipment before we could move forward with the sale. I don't even know if he walked away with anything at the end of the day other than stopping the bleeding.

In hindsight the most valuable assets in the purchase were the combination of the phone number, website and customer files. The return on those three items have paid the purchase price many times over. It's important to note that without the combination of the three together the value of each should drop significantly. Files are no good if customers aren't directly forwarded to you.

We found most customers were ecstatic that we had their files and that they "didn't need to start over". The idea that there is little motivation for a customer to follow a new owner hasn't rung true for us. We have been able to retain a very large number of that companies clients. As long as you can do the work to the same level of quality or better and on time you should gain a large amount of revenue from those customers. I didnt mention price there on purpose. The previous owner was significantly under charging and our prices were much higher and I never had a customer not move forward with work based on our new to them pricing.

Lessons and thoughts:
1. Assess the business on what it is ACTUALLY worth to YOU. The previous owners decisions and situation can not factor into your decisions or you will overpay.
2. Just because there is inventory doesn't mean the inventory has value. If you have $20,000 of seafoam green XXXL shirts, and $30,000 in yellow baby caps how are you going to move those? Inventory is only of value if it's bread and butter merchandise and even then, you should still be ensuring you are paying 2nd hand prices and not wholesale cost.
3. Files, phone # and website are important part of the acquisition. If the company doesn't have a strong local presence these may not be of as much value.
4. Check for liens
5. Unless you are 100% certain there is no "bad" debt, your best to approach it as an asset purchase and not a business acquisition.
6.in your case, Don't over estimate your ability to hop in and be able to produce things at an appropriate quality level. Embroidery and signs, print are self taught industries and you'll do much better to have the previous owners contractually obligated to work for you for a given period of time. I would avoid having this as a consultant situation until you are confident in your own abilities. They will have lots of important information that they can walk away with.......I would probably give this the 2nd amount of weight behind the files and phone number honestly.

 

[Tattoosleeve]

I should also mention there was a sign shop in town who sold all their assets to one of our competitors but there were liens on that equipment too. They had already paid the old owners and then had to pay for the equipment again to get the liens released from the bailiffs. Hard lesson learned for them.

 

[Stacy1203]

I should also mention there was a sign shop in town who sold all their assets to one of our competitors but there were liens on that equipment too. They had already paid the old owners and then had to pay for the equipment again to get the liens released from the bailiffs. Hard lesson learned for them.

We purchased the assets of a failing sign shop three years ago. They were doing $90k gross /year. He was asking $75,000. My heart hit my stomach when I saw the financials. Unfortunately the owner had bought it three years prior and poured in excess of $350,000 of his own imoney into it over the three years. Needless to say that could have been avoided if he knew anything about running a business but he was trying the only way he knew how.

We evaluated the assets as follows.

1. Edge FX & Envision : $12,000 for the pair
2. Customer Files : $10,000
3. Phone Number & Website : $2,000
4. Inventory : Pennies on the dollar - we cherry picked maybe 15% of their on hand materials and tools. The rest of it was odd ball colors or specialty materials that were never going to get used.

We explained our assessment of assets and offered $24k. He balked and walked. A month later he came back and took our offer because it was the only offer he received and every day he stayed open the more he lost.

The sale was hindered for 3 months because there were liens on his equipment we we're trying to purchase. He had to pay out the remainder of the loans on the equipment before we could move forward with the sale. I don't even know if he walked away with anything at the end of the day other than stopping the bleeding.

In hindsight the most valuable assets in the purchase were the combination of the phone number, website and customer files. The return on those three items have paid the purchase price many times over. It's important to note that without the combination of the three together the value of each should drop significantly. Files are no good if customers aren't directly forwarded to you.

We found most customers were ecstatic that we had their files and that they "didn't need to start over". The idea that there is little motivation for a customer to follow a new owner hasn't rung true for us. We have been able to retain a very large number of that companies clients. As long as you can do the work to the same level of quality or better and on time you should gain a large amount of revenue from those customers. I didnt mention price there on purpose. The previous owner was significantly under charging and our prices were much higher and I never had a customer not move forward with work based on our new to them pricing.

Lessons and thoughts:
1. Assess the business on what it is ACTUALLY worth to YOU. The previous owners decisions and situation can not factor into your decisions or you will overpay.
2. Just because there is inventory doesn't mean the inventory has value. If you have $20,000 of seafoam green XXXL shirts, and $30,000 in yellow baby caps how are you going to move those? Inventory is only of value if it's bread and butter merchandise and even then, you should still be ensuring you are paying 2nd hand prices and not wholesale cost.
3. Files, phone # and website are important part of the acquisition. If the company doesn't have a strong local presence these may not be of as much value.
4. Check for liens
5. Unless you are 100% certain there is no "bad" debt, your best to approach it as an asset purchase and not a business acquisition.
6.in your case, Don't over estimate your ability to hop in and be able to produce things at an appropriate quality level. Embroidery and signs, print are self taught industries and you'll do much better to have the previous owners contractually obligated to work for you for a given period of time. I would avoid having this as a consultant situation until you are confident in your own abilities. They will have lots of important information that they can walk away with.......I would probably give this the 2nd amount of weight behind the files and phone number honestly.

Wow! Excellent feedback! Yes we also factoring what we would pay them to stay on for about 6 months to ensure a smooth and seamless hand off. The up side to this is they cater to particular market and they are the only establishment in town that do so. They’ve been able to retrieve 90% of their revenue on this alone. When our workmanship continues to exceed expectations as they have been doing I truly don’t see these clients looking out of town to fulfill their needs. I love that you offered what you felt was right and stuck to your guns. I appreciate your feedback this is definitely spot on! I will keep you posted on this process. Thanks!!

 

[Ringo]

Hi Stacy,
Congrats on your success so far, love to see hard chargers on here. Unfortunately there are a few whiners on this forum. Business based feedback is rare and factual and data driven stuff rarer.

If they show they are netting 40k and grossing 300-350k with 30 years in the business. I wouldn't offer them more than 2x net all in including equipment. They get the lump sum you get the risk and also get to reap the rewards. Don't bother too much with how they manage their books as I assume you are not buying the existing business entity, you will be doing an asset purchase/book of business type deal. If the unit economics are sound and you can leverage some of your existing assets like staff, equipment this purchase could ultimately cost you less at scale.

I think buying older shops for relatively inexpensive and implementing modern marketing efforts to trigger huge growth is better than starting new. I've been in the industry for only 3 years myself and own 3 businesses in the industry.

 

[Stacy1203]

Hi Stacy,
Congrats on your success so far, love to see hard chargers on here. Unfortunately there are a few whiners on this forum. Business based feedback is rare and factual and data driven stuff rarer.

If they show they are netting 40k and grossing 300-350k with 30 years in the business. I wouldn't offer them more than 2x net all in including equipment. They get the lump sum you get the risk and also get to reap the rewards. Don't bother too much with how they manage their books as I assume you are not buying the existing business entity, you will be doing an asset purchase/book of business type deal. If the unit economics are sound and you can leverage some of your existing assets like staff, equipment this purchase could ultimately cost you less at scale.

I think buying older shops for relatively inexpensive and implementing modern marketing efforts to trigger huge growth is better than starting new. I've been in the industry for only 3 years myself and own 3 businesses in the industry.

Congratulations to you my friend!! I love to hear these success stories!! Keep winning and shooting for the stars! I’m excited for your future and everything that’s in store for you. : ) thanks for your feedback Pal!

 

[kcollinsdesign]

Either Stacy1203 is incredibly naive or this is a put-on. Didn't bother reading rest of thread but thought I would chime in. I recommend not being baited by this type of nonsense.

 

[Johnny Best]

Hahaha when I saw the name Ringo it is either a wild west gunslinger staring Gregory Peck, or one of the FabFour.

 

[Stacy1203]

Either Stacy1203 is incredibly naive or this is a put-on. Didn't bother reading rest of thread but thought I would chime in. I recommend not being baited by this type of nonsense.

The fact that you “didn’t bother reading but thought you’d chime in” you must not have a social life or enough business to keep you busy. Sending lots of business and blessings your way.

 

[Texas_Signmaker]

The fact that you “didn’t bother reading but thought you’d chime in” you must not have a social life or enough business to keep you busy. Sending lots of business and blessings your way.

So you insult and then send blessings? I'm not sure you know how that works.

 

[Stacy1203]

So you insult and then send blessings? I'm not sure you know how that works.

Don’t forget, sent business wishes as well. It’s an insult to labeled someone you don’t know as “incredibly naive” this post is ho

So you insult and then send blessings? I'm not sure you know how that works.

An insult is calling someone you don’t know “incredibly naive.” Don’t neglect, I also sent business wishes to keep him busy from chiming in with his negativity.